A Product Market Fit Show | Startup Podcast for Founders
00:00:00 · Peter Walker, Pablo Srugo
[00:00:00] S0: There is no more consensus theme right now than LLMs are good. We should have more LLMs. Like, it's not really a question of this business is gonna work out. It's like, do I have the capital and the access to play in this space, or don't I? I have a feeling that what's gonna happen is a lot of these companies are gonna flop, we're gonna do what we did in 2021 with some major, major outliers that really work. And maybe that's the whole point, but I think there's pain coming for this. Like, if the valuations have gone up at least on a median basis, not just even the the high flyers, have gone up almost two x over the last, call it, three years. So that's a massive difference. You know, it used to be that the amount raised was maybe more like 8 to $10,000,000 in a series a, and now it's much more, call it, 13 to 15. So that's a 50% increase in the capital. [00:00:42] S1: I mean, what I'm telling founders is, it used to be good enough you get to an a, and you gotta pitch this path to a 100,000,000 ARR. Like, it's just not enough. You have to go in at series a with a couple, you know, $23,000,000. I think the meeting's, like, 3 and a half million of ARR or whatever, and you gotta pitch a story of half a billion, if not a billion of ARR for you to be interesting enough to some of these guys.
00:00:42 · Pablo Srugo, Peter Walker
[00:00:42] S1: I mean, what I'm telling founders is, it used to be good enough you get to an a, and you gotta pitch this path to a 100,000,000 ARR. Like, it's just not enough. You have to go in at series a with a couple, you know, $23,000,000. I think the meeting's, like, 3 and a half million of ARR or whatever, and you gotta pitch a story of half a billion, if not a billion of ARR for you to be interesting enough to some of these guys. [00:01:00] S0: There's just a concentration where higher valuations, more capital, but fewer companies. And that's happening at stage after stage after stage. So it takes a lot to get to series a. It takes way more than it used to. The growth rates are higher. The competition is higher. The expectations from investors are higher, and that will definitely push people out along the way. In general, I think the bar for series a is something like two x what it was a couple years ago. [00:01:24] S1: I mean, we're in a bubble. We're a 100% in a bubble. Right? [00:01:27] S0: So 100%. [00:01:28] S1: Yes. And what do we usually do with the bubble? It usually pops. Question is when? [00:01:32] S0: You got a great s one out there. A great, maybe not as great as people were expecting for SpaceX. We'll see. I expect that IPO to go well. And then the next two, maybe later this year, maybe the year after. I don't know. If one of those IPOs really flops, it's gonna be a serious problem. [00:01:47] S1: That's product market fit. Product market fit. [00:01:50] S0: Product market fit. I called it the product market fit question.
00:01:50 · Peter Walker, Pablo Srugo
[00:01:50] S0: Product market fit. I called it the product market fit question. [00:01:53] S1: Product market fit. Product market fit. [00:01:54] S0: Product market fit. [00:01:56] S1: Product market fit. I mean, the name of the show is product market fit. Do you think the product market fit show has product market fit? Because if you do, then there's something you just have to do. You have to pick up your phone. You have to leave the show five stars. It lets us reach more founders, and it lets us get better guests. Thank you. Peter, welcome back to the show, man. [00:02:15] S0: Oh, man. Great to be with you. Apologies in advance for the the raspy voice here. [00:02:20] S1: All good, man. Excited to see what the data has in store is, I think, all you know, Peter, now, famous on not just LinkedIn, but everywhere in the startup world for the charts, visualizations, and just the quality of the data, honestly, which has been before you and Carta really hard to get a hold on. So let's start at the top, man. Let's chat a little bit about q one twenty twenty six. I mean, it's a crazy market out there. Lots of things happening. I think everybody knows valuations are high. There's a lot of activity, but that's the headline stuff, and and we'll we'll kind of dig in further. So maybe let's start with just like the trend on on valuations, you know, focusing on early stage, pre seed, seed, series a, and how that's shaping up, you know, this last quarter.
00:02:20 · Pablo Srugo, Peter Walker
[00:02:20] S1: All good, man. Excited to see what the data has in store is, I think, all you know, Peter, now, famous on not just LinkedIn, but everywhere in the startup world for the charts, visualizations, and just the quality of the data, honestly, which has been before you and Carta really hard to get a hold on. So let's start at the top, man. Let's chat a little bit about q one twenty twenty six. I mean, it's a crazy market out there. Lots of things happening. I think everybody knows valuations are high. There's a lot of activity, but that's the headline stuff, and and we'll we'll kind of dig in further. So maybe let's start with just like the trend on on valuations, you know, focusing on early stage, pre seed, seed, series a, and how that's shaping up, you know, this last quarter. [00:03:02] S0: Well, depending on where you are, it's kinda gone, like, parabolic, man. It's like it's it's kinda tough to keep track of because so much of the attention is being driven by ten, fifteen, 20 names within privates. Or even if you're just talking about, like, seed stage, there's always this cohort of mostly, candidly, AI infrastructure companies that are building foundational models or building, like, the tech around foundational models. And they are getting valued at just astronomical numbers. You know, I call it a 160, hundred and seventy, hundred and eighty, $200,000,000 post money on a seed stage, which is just bonkers. And that just affects everybody else's, like, mood and vibe.
00:03:02 · Peter Walker, Pablo Srugo
[00:03:02] S0: Well, depending on where you are, it's kinda gone, like, parabolic, man. It's like it's it's kinda tough to keep track of because so much of the attention is being driven by ten, fifteen, 20 names within privates. Or even if you're just talking about, like, seed stage, there's always this cohort of mostly, candidly, AI infrastructure companies that are building foundational models or building, like, the tech around foundational models. And they are getting valued at just astronomical numbers. You know, I call it a 160, hundred and seventy, hundred and eighty, $200,000,000 post money on a seed stage, which is just bonkers. And that just affects everybody else's, like, mood and vibe. [00:03:42] S1: This is, like, the category of where you see, like, a $2,000,000,000 seed kinda falls into this well. Right? Ex OpenAI, a person
00:03:42 · Pablo Srugo, Peter Walker
[00:03:42] S1: This is, like, the category of where you see, like, a $2,000,000,000 seed kinda falls into this well. Right? Ex OpenAI, a person [00:03:49] S0: A 100%. You know, it's always we talked about this before. It's always the legible founders. They're spinning out of the right places. They're building something that is, like, there is no more consensus theme right now than LLMs are good. We should have more LLMs. Like, it's not something that you have to fight over. And so it doesn't become a it's not really a question of this business is gonna work out. It's like, do I have the capital and the access to play in this space or don't I, if you're a fund manager? And that's just a different kind of thing. Like, seed stage is not usually about that, but it's so I don't know. I have a feeling that what's gonna happen is a lot of these companies are gonna flop, and we're gonna do what we did in 2021 with some major, major outliers that really work. And maybe that's the whole point, but I think there's pain coming for this. I really do.